Greek wholesale electricity cost Europe’s second highest

Wholesale electricity prices in Greece ranked as Europe’s second highest in the second quarter of 2018, 30 percent higher than the EU average, a study conducted by IOBE, the Foundation for Economic and Industrial Research, has shown.

The country’s elevated industrial energy costs stand as one of the industrial sector’s biggest disincentives, while the government’s energy policy has so far failed to deliver cost-related results, the study noted.

This is unquestionably affecting the level of competitiveness of Greece’s industrial sector, also grappling with a series of regulatory surcharges such as public service compensation (YKO), CO2 emission costs and RES-supporting ETMEAR costs. Adding to the industrial sector’s energy cost burden, the main power utility PPC is applying pressure for tariff hikes.

Acccording to Directorate-General for Energy data used in the study, second quarter wholesale electricity prices were 60.1 euros per MWh in Greece, 55.8 euros per MWh in the UK, 55.1 euros per MWh in Ireland, 36 euros per MWh in Germany and 33.9 euros per MWh in Bulgaria.

A recent PWC consulting firm study commissioned by Belgium’s regulatory authority for energy to compare the industrial electricity costs of Belgium, France, Germany and the Netherlands presented levels that were as much as 80 percent lower than those of Greece.

IOBE report: Fuel taxes to hit growth, spark illicit trade

New fuel tax increases set to be introduced, beginning with heating fuel as of October 15, will severely undermine the Greek economy’s growth potential as well as tax revenues, according to IOBE, the Foundation for Economic and Industrial Research, in a study officially released today.

The tax revenue shortage will be caused by a further dampening of market demand as a result of the fuel tax hikes, the IOBE study notes. Besides heating fuel, tax increases on gasoline, diesel and LNG will follow as of January 1.

The government hopes this latest round of fuel tax hikes can rake in a further 400 million euros by the end of 2017.

The fuel tax hikes are made harsher by the current rebound seen in international crude oil prices, which have risen from 46 dollars to 51 dollars a barrel over the past couple of weeks, prompted by a late-September OPEC agreement for a freeze of daily output levels as of  November.

Assuming no major price fluctuations take place over the next few days in crude oil and the euro-dollar exchange rate, heating oil is expected to hit the Greek market at 92 cents per liter, up 8 percent from last year’s level of 84 to 85 cents per liter registered during the equivalent period.

This heating fuel price rise is the result of a higher special consumption tax (EFK) rate, from 23 cents to 28 cents per liter, a VAT increase on fuel from 23 percent to 24 percent, as well as refinery price increases.

Concerns over the financial standing of Deutsche Bank are applying pressure on the euro currency against the dollar.

Besides the IOBE study, Eurostat and Greek finance ministry figures also highlight the negative impact of fuel tax hikes on demand levels. Since 2009, when fuel tax hikes began rising in recession-struck Greece, fuel demand has fallen by at least 39 percent, severely affecting tax revenues.

The IOBE study also warns that illicit fuel trade will be encouraged as a result of the tax hike and inability by officials to fully enforce an “inflow-outflow” data monitoring system that would enable the Finance Ministry to track purchases and sales in the sector.

IOBE: Fuel taxes to prompt tax revenue shortage, smuggling

New fuel taxes intended to raise 400 million euros over the next year will instead prompt a tax revenue shortage as a result of a further drop in market demand for fuel and increased illicit fuel trade, a study conducted by IOBE, the Foundation for Economic and Industrial Research, has forecast.

The IOBE study, commissioned by SEEPE, the Hellenic Petroleum Marketing Companies Association, will be officially presented on October 10.

The foundation’s study, factoring in various consumption level assumptions, fears the new fuel taxes, to begin with a hike on heating fuel tax as of October 15, will not produce the desired tax revenue results as a result of a further reduction in disposable incomes.

Experience has shown that tax revenues are negatively impacted whenever fuel taxes are hiked, the IOBE report notes, while adding an escalation in fuel smuggling practices could be sparked by the government’s new tax assault.

Heating fuel is expected to hit the market in less than two weeks, on October 15, at a price of 90 to 91 cents per liter, up 7 percent from last winter’s level of 84 to 85 cents, assuming no major crude price fluctuations take place until then. Such a prospect has not been ruled out by analysts.

The anticipated 7 percent increase in heating fuel is entirely the result of an increase in the special consumption tax (EFK) and the hike in the VAT rate imposed on the EFK tax. The VAT rate for fuel has been hiked to 24 percent. International crude prices, currently unchanged compared to last year, have nothing to do with the aforementioned heating fuel price estimate.

As of January 1, gasoline and diesel prices will also be sold at higher prices, by roughly 10 cents and 5 cents, respectively, per liter, representing respective increases of 9 percent and 4 percent, as a result of the EFK hike.

Last week’s decision by OPEC members to retain the cartel’s daily oil production level as of November is prompting an upward trajectory in prices. In addition, fears about the financial standing of Deutsche Bank are pressuring the euro currency against the dollar, meaning the EU’s common currency will not be able to absorb any international crude price increases.

The series of fuel price increases and overall domestic uncertainty could affect Greece’s GDP growth in 2017, the IOBE study warns. The government has set a GDP target growth rate of 2.7 percent for 2017.